Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
If at all possible, selling the subsidiary as a stock sale would be much better for you, the seller.
When you sell a business using an asset sale, you will pay tax on the gains you receive on your assets. You will have to allocate the purchase price among the different assets of your business, and then calculate the gain.
Being that it is a subsidiary, provided it is 80% or more owned by another corporation, it will help that there will be less opportunity for double tax.
In a standalone C Corp, the asset sale is taxed, and then there is tax again once the proceeds are distributed to the owners.
It is going to be an asset sale since the purchaser does not want to assume the contingent liabilities.
If it is asset sale, there will be tax gain recognized on the difference between the purchase price allocated to asset and its tax basis, right?
That is correct
is that all for tax consequences?
any other tax issues we should be aware of?
There is the possibility of double taxation, once the sale is distributed to shareholders in the form of a dividend
the shareholder is a C Corp, a holding company
Yes, but once the dividends are ultimately handed down to the shareholder
they will eventually trickle down to the shareholder
OK. Anything else you can think of?
Nothing else that I can think of. It's fairly straight forward
If dividend received from a sub, isnt there a DRD 100%?
Yes, that is correct
the double tax doesn't apply to a corp receiving dividends from a sub
So, I am still not clear about the trickle down to the shareholder
You meant, an individual shareholder who owns our company's stock?
The holding company has shareholders. Surely the gain from the sale would ultimately be distributed to the shareholders through dividends
Yes, as I stated above: you meant individual shareholders who own our company's stock?
yes, that's what I mean
Yes, I agree and I understand.
Okay...great. Is there anything else you need assistance with today?
Thanks for your help